For Immediate Release
Chicago, IL – March 3, 2010 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: XTO Energy (XTO), EOG Resources (EOG), Anadarko Petroleum Corp. (APC), EnCana Corp. (ECA) and Devon Energy Corp. (DVN).
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Here are highlights from Tuesday’s Analyst Blog:
Steady Cold Trims Gas Supplies
Months of mild weather further weakened demand for the fuel to heat homes and businesses. As a result, natural gas prices (referring to Henry Hub spot prices) trended down to a 7-year-low level of sub-$2 per million Btu (MMBtu) in Sept. 2009.
However, on the back of the sustained inventory drawdown, the commodity staged a phenomenal recovery, breaching the $5.70 per MMBtu level during early Feb. 2010. Things appear to be getting better for the natural gas players, with cold weather slowly cleaning up the storage surplus.
Having said that, the specter of a continued glut in domestic gas supplies (storage levels remain 0.7% above their five-year average) still exists, and inventories are likely to exit the current heating season very near the five-year average.
With winter cold subsiding, demand for natural gas for heating and power-plant fuel will reduce. Further pressurizing the commodity is the rapid rise in the number of drilling rigs working in the U.S. (rig count has climbed 34% from a seven-year low reached last July) that signals a production increase later this year in the face of sluggish industrial demand.
Given the depressed state of the commodity, the in-line drop in reserves pulled down natural gas futures prices on the New York Mercantile Exchange (NYMEX). In particular, during the last few days, natural gas futures have fallen to a 12-week low, pressured by expectations of mild temperatures in the northern U.S.
There are concerns among traders that the market will be oversupplied as winter draws to a close, with rig counts going up and industrial demand still struggling due to the weak economy. These factors translate into limited upside for natural gas-weighted companies and related support plays.
Therefore, we maintain our cautious stance on natural gas-focused E&P players such as XTO Energy (XTO), EOG Resources (EOG), Anadarko Petroleum Corp. (APC), EnCana Corp. (ECA) and Devon Energy Corp. (DVN).
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